CD vs. Money Market Account

Money market accounts are better than CDs if you're looking for a more accessible account. ... MMA rates are typically higher than basic savings accounts and short-term CD rates. CDs can have higher rates than a money market account, but those are often the long-term accounts from two years and upward.

What is the difference between a money market account and a CD?

Money market accounts and certificates of deposit are types of federally insured savings accounts that earn interest. But their rates and ease of access differ. CDs generally offer higher rates and less access to your money. ... MMAs differ from money market funds, which are a type of investment.

Can you lose your money in a money market account?

Money market accounts are insured by the Federal Deposit Insurance Corp. (at banks) and the National Credit Union Administration (at credit unions), so you won't lose your deposits even if the financial institution goes out of business.

Are CDs safer than money market funds?

Money market funds are not guaranteed by the federal government, as are most CDs and savings bank accounts, but they're generally quite safe due to the quality of their investments and the short-term maturities. ... Some money market funds, however, may offer yields as high as you can get on any CD.

What is better than a money market account?

Plain-Vanilla Savings Account

As a safe alternative to money market funds, savings accounts pay fairly low interest, but banks often have low minimums to open the account.

What are the disadvantages of a money market account?

Disadvantages of a Money Market Account

• Minimums and Fees. Money market accounts often need a minimum balance to avoid a monthly service charge, which can be $12 per month or more. ...
• Low Interest Rate. Compared to other investments, money market accounts pay a low interest rate. ...
• Inflation Risk. ...
• Capital Risk.

Should I put my money in a money market account?

That's because they can invest in low-risk, stable funds like Treasury bonds (T-bonds) and typically pay higher rates of interest than a savings account. While the returns may not be not much, money market accounts are still a pretty good choice during times of uncertainty.

Are money market funds safe in a recession?

Money markets provide temporary safety during a recession with short-term, low-risk securities.

Will money market funds break the buck?

(See also: Why Money Market Funds Break the Buck.) When the value of the fund goes below $1, however, it's said to break the buck. Even though this is a rare occurrence, it can happen. Breaking the buck generally signals economic distress because money market funds are considered to be nearly risk-free.

Why is my money market interest so low?

The U.S. Federal Reserve and terrible disasters are the two main causes of decreases in the interest rates on money market investments. ... Disasters lower short-term interest rates because investors take their money out of other investments, such as stock, and put it into the safest investments they can find.

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